India’s civil aviation industry has been one of the sectors hit hardest by the Covid-19 pandemic, and the current surge in cases in major cities is further hurting its chances of a comeback. Adding to its challenges, the government has now capped fares and extended capacity restrictions until November 24.
A government official told Business Standard newspaper that the extension of capacity restrictions would depend on how the coronavirus behaved. The country now has a caseload of 1.4 million, and major cities such as Mumbai, Delhi, Kolkata, Chennai and Bangalore are among the worst hit. State governments are imposing sporadic lockdowns to contain the surge in cases.
When the flights resumed after a two-month ban on May 25, the airlines were allowed to operate one-third of their summer schedules, but on June 26 the government had increased the cap to 45%. However, airlines are finding it difficult to fly even 30% of their capacity due to low patronage and localized lockdowns – often at short notice, which leads to cancellations.
Airline officials claim there are few business travelers and most flights are unidirectional, from metros to smaller towns, and hence there are fewer passengers on return flights. Travel firms claim that over 90% of flight bookings were for one-way trips and on non-metro routes. With most companies now resorting to video calls to keep their employees safe, fewer executives are traveling for business purposes.
The government had imposed airfare curbs to prevent predatory pricing on one hand and the fleecing of passengers on the other. Airlines were told to adhere to the lower and upper fare limits ranging from 2,000 rupees (US$26) to over 15,000 rupees, respectively.
Aviation regulator Director General of Civil Aviation had in May imposed fare limits for these bands – domestic flights of a less than 40-minute duration should have a lower limit of 2,000 rupees and an upper limit of 6,000 rupees. For flights of 40-60 minutes (2,500-7,500 rupees), 60-90 minutes (3,000-9,000 rupees), 90-120 minutes (3,500-10,000 rupees), 120-150 minutes (4,500-13,000 rupees) and 150-180 minutes (5,500-15,700 rupees).
The Center for Asia Pacific Aviation had earlier said that the fare cap was impacting air travel demand as airlines are unable to offer tickets at lower prices to customers. The aviation think tank said that adopting such a mechanism takes away an airline’s flexibility to charge fares at a lower rate to stimulate demand.
Also Read: IndiGo to lay off 10% of its workforce
Airlines across the board are cutting salaries and laying off or furloughing employees to stay afloat amid tepid demand and social distancing restrictions. The latest to do so was IndiGo, India’s largest airline – it had on July 20 announced a 10% cut in its staff strength of over 23,000. GoAir has given leave without pay to 90% of its staff and no-frills carrier SpiceJet has also cut domestic and international layover allowances for its pilots. State-owned airline Air India has also decided to furlough nearly 600 employees for a period ranging from six months to five years.
Various rating agencies have forecast widespread losses for airlines in India due to the pandemic. According to rating agency CRISIL, Indian airlines will face a revenue loss of 1.3 trillion rupees ($17.39 billion) between fiscal 2020 and 2022. The International Air Transport Association said close to three million jobs in aviation and related industries could be lost in India this year because of the pandemic.